Philippines a credible option for non-voice BPO delivery

During an economic slowdown, one secret to survive it is to be more sensitive about the market and have a watchful eye about the current and upcoming demands. One such upcoming demand is non-voice offshore BPO.

The Everest study, The Silent Knight: The Philippines’ Emerging Non-Voice BPO Capability, which includes contributions from the Business Processing Association of the Philippines (BPAP), shows that the Philippines is now poised to emerge as an important destination for non-voice offshore BPO work for buyers looking beyond India to grow their offshoring footprint. It is noteworthy here that by 2012, the offshore BPO market will have an addressable opportunity of $220-280 billion, and as much as 90 percent of this addressable market opportunity will be in non-voice BPO services.

Business process outsourcing (BPO) is the practice of using a third party, contracted to perform specific, specialized processes on a company’s behalf. Although “outsourcing” in its most basic form has been used for decades, such as when a business uses an outside accountant to balance the books, it has become a practice used by the majority of businesses and large companies, on a much larger scale. By outsourcing certain aspects of “doing business,” the company can focus on its primary purpose, whatever that may be.

The Everest Research Institute study shows that while the scale of work is currently low, a number of providers are already leveraging the Philippines for a vast scope of non-voice functions. However, there remains limited awareness of the Philippines’ real capability in non-voice services, which has grown significantly over the past three years.

“Success in voice-based BPO services has positioned the Philippines as the second largest low-cost BPO destination after India, and both countries combined account for 50 percent of the offshore BPO market in revenue terms. In non-voice BPO, most current activity and scale in the Philippines is concentrated on transactional services. Whereas almost all types of non-voice BPO functions are now being delivered from the Philippines, their maturity varies, so while we see relatively high activity and maturity in Finance & Accounting and transcription services, there has been only some activity recently in HRO, with even lesser in Procurement Services. Further, while there has been an increased traction in judgment-intensive knowledge services such as research, analytics and legal services, the scale and maturity remains low.” says Nikhil Rajpal, Principal, Everest Group.

Jimit Arora, Research Director, Everest Research Institute said that “A number of factors are favoring the growth of non-voice BPO in the Philippines. These include acceptance as a key destination for customer service and support; competitive costs; sizable pool of English speaking talent; and a starting base of captives and suppliers. There is strong cultural similarity between the Philippines and the United States, making it easier for Filipino agents to relate to U.S. customers.”

“In terms of operating cost per employee for transactional back-office work, the Philippines offers about 75% and 70% respective savings over tier-II cities in UK and US, which is somewhat lesser savings as compared to India, but sizably more than other offshoring destinations like Monterrey (Mexico) and Prague (Czech Republic). Again, in terms of graduates per annum at 480,000, Philippines lags behind India’s 3,000,000, but is much ahead of Egypt, Argentina, South Africa and Mexico”, adds Jimit.

However, according to Nikhil, managing talent-related constraints will be critical to ensure operational success in the Philippines. He says, “Philippines will need to address four key talent-related challenges – scalability of entry-level talent; availability of specialized skills; availability and quality of managers; and migration of skilled talent.” Challenges regarding shortage of entry-level talent exist in India as well as the Philippines. According to the NASSCOM-Everest study, “Roadmap 2012 – Capitalizing on the Expanding BPO Landscape”, released last year, while the number of people required to support impending growth of BPO in India are available, unless the current focus on “ready-to-eat” talent is altered, the future growth may lead to a shortage of approximately one million entry-level graduates by 2012.

So for those of you who are in the BPO business, perhaps you may want to look at this opportunity and prepare for it.


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